Component Manufacturing Push Seen Driving Next Leg Of India’s Electronics Growth

India’s electronics manufacturing sector is entering a new stage of expansion as the focus shifts from final assembly to domestic production of components and supply-chain products, according to BNP Paribas. The brokerage said increasing localisation and policy support are expected to improve value addition and create fresh opportunities for manufacturers.

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India’s electronics manufacturing output has expanded from about ₹2.6 lakh crore in FY15 to ₹11.5 lakh crore in FY25. Mobile phones now account for nearly 53% of the industry’s production and have played a major role in boosting electronics exports.

Localisation To Drive Future Growth

BNP Paribas said the next phase of growth will be led by component manufacturing, an area that has lagged the broader industry. While the overall electronics manufacturing sector recorded a 19% compound annual growth rate between FY15 and FY25, component manufacturing grew at 9%, leaving substantial scope for import substitution.

The transition is being aided by government initiatives, including the Electronics Components Manufacturing Scheme (ECMS), semiconductor incentives and discussions around a possible Mobile PLI 2.0 programme that may place greater emphasis on domestic value addition.

Under the third and fourth rounds of the ECMS, investments of nearly ₹49,000 crore have been approved across segments such as batteries, printed circuit boards, connectors, capacitors and display modules.

Dixon Technologies Remains Preferred Pick

BNP Paribas maintained its ‘Outperform’ rating on Dixon Technologies and raised its target price to ₹12,500 from ₹11,900. The brokerage said the company is well positioned to benefit from increasing localisation through investments in display modules, camera modules and optical transceivers.

Regulatory approval for Dixon’s proposed joint venture with Vivo remains an important near-term trigger. The brokerage also noted that a Mobile PLI 2.0 programme, which could target domestic value addition exceeding 55%, may further support the company’s expansion plans.

Dixon has already received ECMS approvals for display modules, camera modules and optical transceivers, while approvals for lithium-ion batteries and mechanical enclosures are pending.

Amber Enterprises Gains From PCB Opportunity

BNP Paribas also retained a positive view on Amber Enterprises and increased its target price to ₹8,290 from ₹8,160. The brokerage said printed circuit boards present a major import-substitution opportunity.

PCBs account for around 3-3.5% of India’s electronics production value, but only about 12% of domestic demand is currently met through local manufacturing. BNP Paribas estimates that if domestic producers capture 30% of the market by FY30, the segment could grow to nearly ₹20,000 crore, implying a CAGR of around 37%.

Amber has expanded its presence through acquisitions and partnerships, including investments in Ascent Circuits, Shogini Technoarts and a proposed venture with Korea Circuit.

Kaynes Technology Downgraded

BNP Paribas downgraded Kaynes Technology to ‘Underperform’ from ‘Neutral’ and reduced its target price to ₹2,990 from ₹4,060. The brokerage cited pressure on working capital, weak operating cash flow and rising funding requirements.

According to BNP Paribas, companies with stronger exposure to components and localisation are likely to benefit the most as India’s electronics manufacturing ecosystem moves higher up the value chain.